Blog (12)

IT companies with growing revenues and strong mindshare in their home market need to determine early-on when to start their internationalization processes.This question has become much more time sensitive and strategic as the cost of information has gone down significantly. Barry Downs and Paul Nunes, in their 2014 book “Big Bang Disruption” captures this issue well when they state:

“Consumer no longer have any excuse for making and uninformed purchase”

-What we learned by living and doing business with Mexican decision makers-

Mexico has one of the most iconic cultures in the world and one of the most complex to do business. Besides its well-known gastronomy, the marvelous tequila and traditional mariachi music that with any doubt contribute to support the fact that is top in the Rank of Heritage in Latin America, Mexico is also unique in the way companies and executives make business decisions. In the past 12 years doing business in Latin America I have participated in several conversations with other executives about the Mexico uniqueness in the way they make decisions. These are some notes prepared to document the Mexican way to decision making process that will provide some clues to succeed doing business with the second economy of the region.

In the book “The Rise and Fall of Nations” by Ruchir Sharma from Morgan Stanley, the author presents 10 factors that are critical for a country economic success. His first chapter is on population since demographics plays such a critical role in a nation’s wealth creation.

Countries with a growing talent of workers like India tend to experience much faster growth that countries that their population are shrinking like Japan and Italy. Note also that there is a lag between the change in GDP and population growth since it takes time for a new borne to reach working age.

Anyone interested on how the barriers of commerce are disappearing has read “The World is Flat” by Mr. Freidman (http://www.thomaslfriedman.com/). Some of the concepts presented in this book released in 2005, like the 10 forces that flattened the world (open-sourcing, outsourcing, digital, mobile, etc.) are familiar subjects to executives in the IT industry.

Meet Mr. Pankaj Ghemawat (https://www.ghemawat.com/), who authored the recent Harvard Business Review cover article “Globalization in the Age of Trump”. Mr. Ghemawat states that people overestimate the intensity of the global business, and that cultural, administrative/political, geographic and economic factors represent major globalization hurdles.

Enterprise IT vendors goal is to operate in the WW stage. Besides the financial rewards, other market realities drive this goal: information about technology vendors could be accessed from any corner of the world; large banks, telecoms, retails, airlines, etc., are found in all regions of the world; innovating companies with sophisticated customer engagement processes are doing business in all major metropolitan areas; and the skipping of technology waves in less advanced economies that allows then to catch-up faster to new technology models. Many times, these market facts run ahead to the vendor’s implementation plans.

Software, and the “apps” and platforms (cloud, mobility, IOT) it enables, is becoming a driving force in today’s economy. Companies depend on software to serve their customers better and gain competitive advantage; cities with intense focus on digital technologies---Austin, Boston, NYC, San Francisco, Seattle-- are becoming entrepreneurship magnets.

How is LATAM’s software development sector? The answer: Doing very well and growing rapidly. The growth is fueled by several trends that should continue fostering the software development marketplace for many years in the future:

Latin America and The Caribbean is one of the most dynamics regions in the world having an economy of US$ 6 trillion, population of 620 million people, and an IT market estimated to be $300 Billion. The size of the Brazil’s and Mexico’s economies, the new insertion of Argentina in the world financial markets, and the growth experiencing by Chile, Colombia and Peru makes this region a very interesting one for IT vendors to participate in.As described on our blog dated March 26th, the region brings a level of complexity that requires knowledge and experience in the various countries to be successful. In addition, the current economic slowdown has caused a recession in some countries like Brazil.

In the book “Winning in Emerging Markets” (Harvard Business Press, 2010), the authors Tarun Khanna and Krishna Paletu, who have many years studying multinational companies entering new markets, present an interesting approach on how to be successful in emerging markets. This blog highlights some of the concepts discussed in the book:

One of the question we most commonly answer to companies entering the Latin America is if doing business South of the border is that different. The answer, similar to other international markets, is: Yes, and No.On the No side, doing business in Latin America is similar to the US since Latin America is comprised of democratic countries with market driven economies, the rule of law, comparable vertical markets, and technology adoption that--with a time lag—mirrors the US.

The Pacific Alliance (PA), Alianza del Pácifico in Spanish, is one of two major trade blocks in the Latin America (LATAM), and is comprised of Chile, Colombia, Peru and México.

The GDP of the PA countries makes them the 8th largest economic power and a population of 216 M people. It represents LATAM’s 38% of GDP and 50% of trade. PA was founded in 2011 and its charter goals are: